Flush With Cash and Fearing Tighter Rules, Major Carriers Shun Broadband Stimulus

The Commerce and Agriculture departments say the plan to broaden high-speed Internet access can be accomplished without the big carriers.
The Commerce and Agriculture departments say the plan to broaden high-speed Internet access can be accomplished without the big carriers. (Wade Payne)

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By Cecilia Kang
Washington Post Staff Writer
Friday, August 14, 2009

The Obama administration made a national priority of spreading high-speed Internet access to every American home and offered stimulus money to help companies pay for it, but the biggest network operators are staying away from the program.

As the Aug. 20 deadline nears to apply for $4.7 billion in broadband grants, AT&T, Verizon and Comcast are unlikely to go for the stimulus money, sources close to the companies said.

Their reasons are varied. All three say they are flush with cash, enough to upgrade and expand their broadband networks on their own. Some say taking money could draw unwanted scrutiny of business practices and compensation, as seen with automakers and banks that have taken government bailouts. And privately, some companies are griping about conditions attached to the money, including a net-neutrality rule that they say would prevent them from managing traffic on their networks in the way they want.

"We are concerned that some new mandates seem to go well beyond current laws and [Federal Communications Commission] rules, and may lead to the kind of continuing uncertainty and delay that is antithetical to the president's primary goals of economic stimulus and job creation," said Walter B. McCormick Jr., president of USTelecom, a trade group that represents telecoms including AT&T and Verizon.

Yet those firms might be the best positioned to achieve the goal of spreading Internet access to underserved areas, some experts say.

"If you want to get broadband out, you have to do it with [those] who brought you to the dance in the first place, and in this case it is the incumbent cable and telephone carriers who have 85 percent of lines in the country," said Robert Atkinson, president of the Information Technology and Innovation Foundation, a Washington tech policy think tank. "This is not basket weaving. This is really complex and intensive technical stuff that takes a fair amount of sophistication and scale to be able to do right and to continue to upgrade."

Obama has pushed for universal access to broadband since his presidential campaign, saying it would underpin the country's economic future. The stimulus funds target homes and businesses in the hinterlands that have largely been overlooked by broadband providers because of the hefty costs to lay down fiber-optic and other broadband pipes to small communities.

At the same time, the government has promised more scrutiny of industry practices that seem to limit consumer access to services, such as Comcast blocking the peer-to-peer file sharing service BitTorrent in 2007 and Apple's recent decision to block Google's voice service and the free Internet calling service Skype on the iPhone.

Those efforts have alarmed the major carriers. Specifically, some of the biggest firms fear that a clause in the stimulus plan that says recipients of the grants cannot "favor any lawful Internet applications and content over others" -- the concept known as net neutrality -- could lead to more rules down the road.

This condition goes beyond guidelines at the FCC that have been criticized by consumer advocacy groups as too vague. Carriers have pushed to keep current rules in place and see the condition on the stimulus grants as a potential precursor for additional rules at the FCC on how carriers can manage content over the Web.

The companies paint dire scenarios where new rules would lead to networks getting clogged with spam and too much video content, slowing down service for all users.

"It's not cost-effective for the big network operators to play in rural [markets] in the first place, and if they take federal money that comes with all these strings attached to it, they are opening themselves up to being regulated even further," said Roger Entner, head of communications research for Nielsen IAG.


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